Labour warned that workers have taken a pay cut of over £1,000 since 2010.

“People have now taken an average £1,200 pay cut since the election because jobs are so hard to come by and today we see there's still more than five people chasing every vacancy,” said Liam Byrne, the shadow work and pension secretary.

Charles Levy, senior economist at The Work Foundation, said: “Wage growth remains low, tempering what would otherwise be a very positive picture. Annual increases in total pay were only 1.4 per cent in December, well behind inflation.

“This means that on average, living standards for those in work are still falling.”

There was good news for the Government as the figures also showed that the number of people claiming jobseeker's allowance has fallen to a near two-year low after a huge increase in employment.

Almost 30 million people were in work at the end of 2012, an increase of 154,000 on the quarter to September and the highest total since records began in 1971.

The so-called claimant count fell for the third month in a row in January, down by 12,500 to 1.54 million, the lowest since June 2011.

Unemployment, including those not eligible for benefit, fell by 14,000 in the final quarter of last year to 2.5 million - 156,000 lower than a year ago.

But youth unemployment increased by 11,000, the highest rise for a year, and the number of people with more than one job increased by 41,000 to 1.1 million.

The number of people classed as economically inactive, including long-term sick, people looking after a family or those who have given up looking for work, fell below nine million, the lowest figure since the autumn of 2006.

Iain Duncan Smith, the Work and Pensions Secretary, described the unemployment figures as “remarkable”.

“What's really important in the figures I thought… is that the long-term unemployment has fallen,” Mr Duncan Smith told Sky News.

“It has fallen by an accelerating amount - 15,000 - and it is clear that the labour market is very active, we've got more people in work, women's unemployment is falling and overall claimant count is actually falling.

“So in difficult times this is a remarkable set of figures and it is also remarkable because it's a pat on the back... for British industry and the private sector, because these are private sector jobs not public sector jobs.

“The private sector has been stepping up to the mark and employing more and more people and giving them a chance, which is really good news.”